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Race-To-The-Bottom Tariff Cutting

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Abstract

This paper provides an empirical assessment of race-to-the-bottom unilateralism. It suggests that decades of unilateral tariff cutting in Asia?s emerging economies have been driven by a competition to attract FDI from Japan. Using spatial econometrics, I show that tariffs on parts and components, a crucial locational determinant for Japanese firms, converged across countries following a contagion pattern. Tariffs followed those of competing countries if the latter were lower, if FDI jealousy was high, and when competing countries were at a similar level of development.

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  • Pierre-Louis Vézina, 2010. "Race-To-The-Bottom Tariff Cutting," IHEID Working Papers 12-2010, Economics Section, The Graduate Institute of International Studies, revised Jul 2010.
    • Handle: RePEc:gii:giihei:heidwp12-2010
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    Cited by:

    1. Asian Development Bank (ADB), 2013. "Asian Economic Integration Monitor March 2013," ADB Reports RPS135470-3, Asian Development Bank (ADB), revised 05 Nov 2013.
    2. Zhen Xu & Jianbai Huang & Feitao Jiang, 2017. "Subsidy competition, industrial land price distortions and overinvestment: empirical evidence from China’s manufacturing enterprises," Applied Economics, Taylor & Francis Journals, vol. 49(48), pages 4851-4870, October.
    3. Marco Fugazza & Frédéric Robert-Nicoud, 2014. "The “Emulator Effect” of the Uruguay Round on US Regionalism," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1049-1078, November.
    4. Baldwin, Richard, 2011. "21st century regionalism: Filling the gap between 21st century trade and 20th century trade rules," WTO Staff Working Papers ERSD-2011-08, World Trade Organization (WTO), Economic Research and Statistics Division.
    5. Baldwin, Richard, 2010. "Unilateral tariff liberalisation," CEPR Discussion Papers 8162, C.E.P.R. Discussion Papers.
    6. Xin Zhao & Gregmar I. Galinato & Tim A. Graciano, 2019. "The Welfare Effects of Opening to Foreign Direct Investment in Polluting Sectors," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 243-269, September.
    7. Jaime de Melo & Anna Twum, 2020. "Supply chain trade in East Africa: Prospects and challenges," Working Papers hal-02493410, HAL.
    8. Adams, Laurel & Régibeau, Pierre & Rockett, Katharine, 2014. "Incentives to create jobs: Regional subsidies, national trade policy and foreign direct investment," Journal of Public Economics, Elsevier, vol. 111(C), pages 102-119.
    9. Jaime de Melo & Jean-Marc Solleder, 2022. "Patterns and Correlates of Supply Chain Trade in MENA and SSA," Working Papers hal-03649085, HAL.
    10. Asian Development Bank (ADB), 2013. "Regional Cooperation and Integration in a Changing World," ADB Reports RPT135515-3, Asian Development Bank (ADB), revised 15 May 2013.
    11. Sokolovskyi, Dmytro, 2021. "Is tax competition necessarily a Race to the bottom? Optimal tax rate trajectories in the model of tax competition for different objective functions," MPRA Paper 109284, University Library of Munich, Germany.
    12. Jayant Menon, 2013. "Can FTAs Support the Growth or Spread of International Production Networks in Asia?," Departmental Working Papers 2013-06, The Australian National University, Arndt-Corden Department of Economics.
    13. Jayant Menon, 2014. "From Spaghetti Bowl to Jigsaw Puzzle? Fixing the Mess in Regional and Global Trade," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 1(3), pages 470-483, September.

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    More about this item

    Keywords

    Trade policy; political economy; unilateralism;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East

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